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Astec Industries Lags Estimates

Astec Industries Inc. (ASTE - Free Report) has reported its fourth-quarter 2012 results, with earnings of 23 cents per share declining 36% from the 36 cents in the year-earlier quarter and falling short of the Zacks Consensus Estimate of 39 cents.

Total revenue fell 10% to $227.6 million from $253.3 million in the year-ago quarter, missing the Zacks Consensus Estimate of $248 million. Domestic sales of the company slid 10% year over year to $129 million in the quarter from $143 million. International sales declined 10.7% to $98.6 million, driven by weak performance in the post-Soviet states and in South America and in the Middle East, offset by higher sales in Mexico and Asia. Parts sales were $58.1 million, a 5% increase from $55.4 million in the prior year quarter.

Costs and Margins

Cost of sales decreased 10% to $179.6 million in the quarter from $199.2 million in the prior-year quarter. Gross profit declined 11% to $48 million from $54 million in the year-ago quarter. Consequently, gross margin contracted 20 basis points year over year to 21.1% in the quarter.

Selling, general, administrative & engineering expenses decreased 4% to $40 million in the reported quarter. Income from operations decreased 35% to $8.2 million from $12.6 million in the year-ago quarter. Operating margins contracted 140 basis points to 3.6% in the quarter.

Segment Performance

Revenues in the Asphalt Group segment decreased 12% to $59.7 million from $68 million in the year-ago quarter. Segment profit declined 16% to $7.5 million from $8.9 million in the prior-year quarter.

Total revenue of the Aggregate and Mining Group segment decreased 8% to $77.4 million in the quarter from $84.6 million in the previous-year quarter. Segment profit was $4.8 million in the quarter versus $8.4 million in the prior-year quarter, down 42%.

Mobile Asphalt Paving Group segment’s total revenue decreased 24% to $34.3 million from $45 million in the year-ago quarter. Segment profit during the quarter plunged 81% to $1.1 million from $5.7 million in the year-earlier quarter.

Underground Group reported revenues of $21 million versus $16.4 million in the year-ago quarter. The segment reported a loss of $1.1 million compared with a profit of $3.6 million a year ago.

All Others reported total revenue of $35.2 million, down 9.3% from $38.8 million in the year-earlier quarter. Segment loss was $7.4 million, narrower than the year-ago quarter’s loss of $12 million.

Fiscal 2012 Performance

Astec Industries’ fiscal 2012 earnings per share stood at $1.45, a 16% drop from $1.73 per share earned in 2011 and way behind the Zacks Consensus Estimate of $1.66.

Astec reported revenue of $936.3 million in fiscal 2012, up 3% year over year but lagged the Zacks Consensus Estimate of $995 million. Domestic revenues increased 5.3% but part sales upped 11.8%. However, international sales dipped 0.3% year over year.

Financial Position

Cash and cash equivalents amounted to $81 million at the end of the 2012, up from $57 million as of 2011 end. The company has no debt on its balance sheet. Astec’s backlog decreased to $264 million at the end of 2012 from $269 million at the end of 2011 as an 8% increase in domestic backlog was offset by a 13% decline in international backlog.

Our Take

Astec’s customers depend on government funding for the construction and maintenance of the infrastructural projects. Although a new 27-month Federal highway funding bill was passed in Jul 2012, it was too late in the 2012 construction season to bear an impact. Owing to the uncertainty in Federal infrastructure customers have tightened their budgets. However, with the Federal highway funding bill in place, Astec will benefit from the pick up in construction.

Astec continues to invest significantly in manufacturing new products and upgrading the existing products, which will benefit the company moving forward. Astec will benefit from a recovery in the economy and the pent up demand for equipment. The company currently has a Zacks Rank #2 (Buy).

Peer Performance

One of the major companies in the machinery – construction and mining industry, Caterpillar Inc. (CAT - Free Report) reported fourth-quarter adjusted EPS of $1.91, down 18% from $2.32 in the prior-year quarter, but ahead of the Zacks Consensus Estimate of $1.70.

Joy Global Inc. reported adjusted earnings of $1.99 per share in the fourth quarter of fiscal 2012, compared with $1.83 per share in the fourth quarter of fiscal 2011 and ahead of the Zacks Consensus Estimate of $1.90.

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